Water supplier agrees £1.4bn revolving credit facility that offers cheaper interest rates as reward for boosting ESG performance
Thames Water has this week become the latest corporate to leverage an innovative form of green finance to boost environmental, social and ethical practices within its business.
The water supplier has agreed a new £1.4bn Revolving Credit Facility (RCF) that links its interest rates to performance against Thames Water's Environmental, Social and Governance (ESG) metrics.
If Thames Water outperforms its ESG score - calculated using its Infrastructure Global Real Estate Sustainability Benchmark (GRESB) score - it will be able to borrow cash at a lower interest rate.
Thames Water's chief financial officer Brandon Rennet said the new RCF was part of the firm's strategy to improve trust in the business, which in the last two years has also seen it engage with green bonds, wind down its Cayman Islands subsidiaries and overhaul its executive team. "This facility closely follows the creation of our Green Bond Framework and underlines our commitment to sustainability and the pursuit of the UN Sustainable Development Goals," he added.
An RCF is a lending structure that allows for the loan amount to be withdrawn, repaid, and redrawn again in any manner and any number of times, until the arrangement expires.
Corporates are starting to harness RCF's ability to incentivise change within a business - earlier this year Dutch chemicals giant Royal DSM deployed a specialised RCF to drive carbon reductions in its business.
Thames Water's RCF will be used to finance general corporate spending and will initially be available until 2023, with the option of a two-year extension. The deal involves 13 banks, and was co-ordinated by BNP Paribas.
"We are proud to support Thames Water in advancing its environmental and social objectives through this innovative transaction," said Cecile Moitry, director of sustainable finance and investment at BNP Paribas CIB. "It's a tangible example of where financing can be aligned with positive impact incentives to encourage sustainable activities."